Should I Still Buy With a Higher Interest Rate?

Should I Still Buy With a Higher Interest Rate?We know you may be hesitant to buy a home in Columbus right now, but there are many benefits of homeownership that are not at all affected by higher interest rates. Because mortgage rates were down below 3% just a few years ago, some buyers are waiting for those optimal conditions to return before they buy. 

The problem with this? Experts say those 3% and 4% rates may not be coming back any time soon, or ever. Erika Rogers of Red Rock Real Estate says, "Looking for the unique market conditions we saw in 2020 and 2021 to return is a major mistake that will lead buyers to miss their realistic opportunities while they wait for an ideal. We saw what many real estate pros call 'unicorn conditions' during those years, but if you missed your chance then you still have plenty of great opportunity in today's market. Don't let looking back cause you to miss out on your own potential future in real estate."

Buying a home still offers a long list of benefits that aren't affected by increased interest rates. Sure, your mortgage payment is going to be higher today than it was 2 years ago, but these are the benefits that make owning a home still totally worth it. 

Equity

One of the primary advantages of homeownership is the opportunity to build equity. Equity is the difference between the market value of your home and the amount you still owe on your mortgage. Each mortgage payment you make reduces your loan balance and increases your equity.

Over time, as you pay down your mortgage and your home potentially appreciates in value, your equity grows. This equity can be a significant financial asset, providing you with greater financial stability and the option to borrow against it if necessary.

Long Term Investment

Real estate is a sound long-term investment. Despite fluctuations in the housing market, property values are known to appreciate over time. By purchasing a home, you are investing in an asset that is likely to increase in value, providing you with financial gains in the long run. This potential for appreciation can offset the higher initial costs associated with a higher interest rate, making the investment worthwhile over time.

Tax Benefits

Homeownership comes with several tax advantages that can help mitigate the impact of higher interest rates. Mortgage interest and property taxes are usually tax-deductible, reducing your taxable income and, consequently, your overall tax liability. 

These deductions can result in substantial savings, particularly in the early years of your mortgage when interest payments are highest. Additionally, some regions offer tax incentives for first-time homebuyers or those investing in specific areas, further enhancing the financial benefits of owning a home. Of course, check with your tax professional to be sure about how you will qualify.

Stabilize Your Expenses

Housing costs usually make up the biggest expense in any household budget. When you rent, you are subject to rent increases over which you have little control. In contrast, with a fixed-rate mortgage, your monthly principal and interest payments remain constant throughout the loan term, providing predictability and stability in your housing costs.

Even if your interest rate is higher initially, locking in your housing costs can protect you from inflation and rising rental prices, making your long-term financial planning more manageable. You can always stay aware of interest rates and be open to refinancing in the future, but you'll know that your housing costs will only stay the same or decrease.

Hedge Against Inflation

Real estate is often considered a hedge against inflation. Even if the home seems expensive now, it will begin to feel more and more affordable as costs rise and your housing payment stays stable.

As the cost of living increases, the value of tangible assets like real estate typically rises as well. By owning a home, you can protect yourself against the eroding effects of inflation on your savings and income. Even with higher initial interest rates, the appreciation of your property's value over time can help preserve and grow your wealth.

The bottom line is this: rather than focusing on the ideal interest rate or timing the market just right, recognize the factors you can control. If you qualify for a mortgage and are comfortable with the payments, real estate remains a smart investment even with increased rates.

Ready to learn more about homes for sale in Columbus? Contact us any time.

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